Symantec Gets Crushed by Mysterious Internal Investigation Two Years after CEO & Team from Acquired Company Took Over

Bain Capital sold Blue Coat Inc. to them.

“We are pleased with our fourth quarter results,” and so on and so forth, said Symantec CEO Greg Clark Thursday evening as part of the fourth-quarter earnings report. He, along with much of his top management team, hailed from Blue Coat Inc., which Symantec had acquired in August 2016 for $4.6 billion.

The maker of Norton anti-virus software reported revenues that were up 10%, gross profits rose, and the net loss dropped to $35 million compared to $143 million in Q4 last year. But then it did this:

It gave a disappointing forecast for its current fiscal year, including nearly flat revenues and “adjusted earnings” below the hopes of Wall Street analysts.

It disclosed that the Board of Directors’ audit committee has launched a mysterious investigation “in connection with concerns raised by a former employee,” that it has advised the SEC, and that it would delay its annual report.

It disclosed that, as result of the investigation, it may have to restate past financial statements and may change guidance in the future.

And it flat-out scrapped the customary and expected question-and-answer part of its conference call with analysts, not only on the topic of the investigation but totally scrapped the Q&A on any topic, which no S&P 500 company may have ever done before.

It shocked the bejesus out of the always hopeful Wall Street analysts.

And they jumped all over each other lowering their price targets for the shares, now, rather than beforehand so that investors could have gotten out in time.

Shares, after already plunging in afterhours trading on Thursday, plunged 34% this morning, taking about $6 billion in market cap with them in one fell swoop.

Also note the two blue circles in the above chart (top right). These are indicators of technical analysis. When you hover over the circles, a little window pops up and says “bullish reversal, reliability high,” just days before the collapse of the shares. Here’s the one from May 7:

The Audit Committee of the Board of Directors has commenced an internal investigation in connection with concerns raised by a former employee. The Audit Committee has retained independent counsel and other advisors to assist it in its investigation.

The Company has voluntarily contacted the Securities and Exchange Commission to advise it that an internal investigation is underway, and the Audit Committee intends to provide additional information to the SEC as the investigation proceeds.

The investigation is in its early stages and the Company cannot predict the duration or outcome of the investigation.

The Company’s financial results and guidance may be subject to change based on the outcome of the Audit Committee investigation. It is unlikely that the investigation will be completed in time for the Company to file its annual report on Form 10-K for the fiscal year ended March 30, 2018 in a timely manner.

Symantec gave no other details about this investigation and what the problem is that it is trying to investigate.

Reuters reported that, according to “a source familiar with the matter,” this internal investigation is “separate to another investigation launched in November by Lifshitz & Miller LLP into the board for possible violations of federal securities laws in relation to its executive compensation awards.”

Speculations are now swirling how much this mysterious investigation – and whatever it may find – might impact the financial health of the company, and if it means that the company’s newfangled Blue Coat management team would be sacked.

Blue Coat was majority-owned by Bain Capital. At the time of the sale, Blue Coat had $600 million in revenues. Symantec paid dearly for it: The price tag of $4.65 billion amounted to nearly 8x annual revenues. But in these crazy times, none of this matters. And Bain Capital came out nicely.

Symantec said in the acquisition announcement: “With the acquisition of Blue Coat, Symantec will enhance its leadership position to define the future of cybersecurity and set the pace for innovation industrywide.”

Now I’m left wondering just what exactly Symantec got, in terms of this acquisition and the management team that came along with it, or if the “concerns raised by a former employee” are related to something entirely different. But it sure is nice to know that analysts kept touting the acquisition, the management team, and the shares until the last moment.

Manufacture need by installing an anti virus in your software in order to increase sales ? Nahhh … that’d be like accusing the pharmaceutical industry of inventing fictitious diseases , psychosis and conditions in order to increase their sales .. wink wink … ( sarcasm most definitely intended )

FYI; Online/Digital Security 101 . The only thing you can be secure about when it comes to online/digital security is that there is no such thing as online/digital security … for anyone .

I am not sure why you would suggest that fibromyalgia is a fictitious disease (is that what you are suggesting?).

I would agree that doctors know nothing about it and that it covers a great number of symptoms and that doctors have no answer to it – so it is not a very helpful diagnosis, but if you are suggesting that people are presenting themselves as ill when they are not, then you couldn’t be more wrong.

As someone who suffered with this complex set of symptoms for more than 30 years, allow me to assure you that it is both real and debilitating. And yes, doctors have no idea.

The answer – as I overcame it – is to recognize that it is an auto-immune problem that is sourced in the stomach and intestines. Key terms: digestion; enzymes; paleo, low stomach acid; hydrochloric acid; sauerkraut, raw apple cider vinegar, gut and psychology syndrome.

I hope that these key words get to any sufferers out there. It may turn their lives around.

L Lavery

May 12, 2018 at 2:01 am

According to some, Windows is a virus. An alternative OS is Linux, which is pretty safe[1]. Linux Mint has a Windows user friendly interface[2]. I guess you have to get a little geeky, in the sense you have to install it yourself.

Yes, good point, there’s a lot of useful software written for Windows, not so much for Linux. Also, UAC (new to me, thanks Matt P) makes Windows much safer.

Of course, you can always run two machines. I used to do my work off line on Windows (as my customers ran my software under Windows) and go on line with Linux on a separate machine. Why be connected to, what is tantamount to, the wild west if you don’t need to be.

Seriously, use the latest operating system, install updates on schedule, stay off sketchy websites, don’t click on suspicious email attachments, and just use Windows Defender if on Windows 10. And always backup on a regular basis. Optional: install MalwareBytes. That’s all you need to do.

I’ve had Norton anti-virus for years, and in the last year I’ve noticed annoying/crappy changes. It will be very interesting to see what this investigation turns up – what used to be a good product is no longer. Thanks, Wolf for this information.

Norton, Bitdefender, and Kaspersky routinely rank at the top, together, at their ability to block malware, every year.

Norton anti-virus however, has gotten more complicated, buggier and more hangup prone over the years, and more expensive, and sucks. I gave up on it years ago.

Kaspersky is basically a side branch of the FSB/Russian government, which is why it is consistently the absolute best (and first) at detecting viruses/malware generated by our very own NSA. But seriously, no patriotic American citizen should be buying this Russian spyware.

McAffee sucks at detecting viruses, tries to sneak on board with all sorts of free software like Adobe Reader updates, and is a nightmare to get out of an auto deduct subscription. I absolutely hate this company!

Malwarebytes consistently tests even more poorly than McAffee in anti-virus reviews. It sucks. Really! I have NO CLUE why people keep touting it. Come on, read some anti-virus reviews folks!

I use Bitdefender, a Romanian product. Top-rated, not buggy, and not Russian spyware, reasonably priced with their 10-computer subscription.

Bitdefender or anything else, your data are for sale, not only to the highest bidder, but to everybody who is willing to pay for it… I would not be surprised if the taxpayer’s money were clandestinely offered to US antivirus makers (how else can some companies offer their oroducts for free? Norton was one of those for quite a few years… I guess, they were “patriotic.”). Moreover, Windows has countless more or less publicly-known backdoors that even starters can exploit.

All antiviruses spy for the governments of the countries in which they are made, which is why I liked Agnitum, a program made by Russians in Germany. (Kaspersky took over 16 months ago).

If you live in the US, chances are it is mostly Americans spying on you. It is your “patriotic duty” to disallow that as much as possible, so you might as well go with the best against such attackers: Kaspersky. Of course, consider if the Russians can use your data against you. Chances are, Americans are a million times more likely to pose any danger to you… Of course, the Russians can always decide to sell your data back to the US government (or crooks), although Kaspersky offered the US government the source code, when the anti-Kaspersky hysteria began (the US government turned down the offer).

Win10 Defender is all you need, no subscriptions, no worries about Windows compatibility.

However, in addition to Defender you need some common sense! Stay away from the “illegal” sites and those sites offering the latest films for free. You are likley to download more than just the film!! Never click on a web link unless you know who sent it to you. Never insert a USB stick unless you know where it came from and it has been scanned

P.S.
Microsoft has gotten better and Windows Defender doesn’t absolutely suck anymore at blocking malware. But it is still not very good, even when just comparing it to other FREE antivirus products.

I used to use the FREE AVG and AVAST, but they got increasingly buggy and annoying with their intrusive ads and popups. And they are not as good at catching the latest viruses as the paid subcription versions of the top three – Norton, Bitdefender, Kaspersky

http://www.av-test.org has some interesting results which shows McAffee scoring very well and the latest Norton doing poorly. Kaspersky scores well also. Bitdefender gets a slight ding for usability which I don’t quite understand since it is very usable. Malwarebytes is not on the list.

I would note that McAffee is what is installed on all the hospital office computers and workstations where I work, which means McAffee scored a major deal with the corporate hospital chain. And at my parent’s home, their ATT internet came pre-bundled with a McAffee Anti-virus. Which would be huge sources of revenue for McAffee, to be tied into both ATT internet and this big hospital chain..

I personally haven’t seen Norton in use by anybody for a few years. So, If I had to guess, their internal audit is going to show that somebody has been fudging their profit statements for a while.

Yeah, the more I read about it, the more it looks like Symantec is going to be a disaster. Norton was a good product in the beginning, when its founder was running the company, but after he sold it, in recent years Symantec has just cycled through a series of CEOs.

If I had to guess, at least a few of these guys were like the KMart CEO caught embezzling that marked the beginning of the end for KMart as a major retailer. The biggest clue in this whole stinky story is that Symantec buys a company and then the management team of that company takes over Symantec! Ask yourself, why would that happen?
Almost certainly the previous management team was puffing up the Symantec stock price so the company could buy all these other companies. And then these guys sold their stock options and bailed before the whole scam collapsed.

The stock dropped 33% today, but all that did was take off last year’s gains. For that reason, I think the stock is still overpriced. ”

I was surprised the company indicated it has an internal investigation going on and would let the SEC know the results of that investigation. I guess that’s a desperate attempt to keep the SEC out, but it seems to me the SEC should open up its own investigation and find out what really happened. Expect the usual class actions lawsuits as well.

Lots more bad news to come out. For sure a SEC investigation, and perhaps a criminal investigation. I wouldn’t touch the stock.

If the company is smart, they’ll fire a few heavyweights this week to limit the damage.

Remember Martin Shrekeli? The guy is like a lobster being slowly boiled alive and will be made an example of.
His crime is not to have obscenely hiked the price of a lifesaving drug. His crime is he lied to his investors, which included some pretty big Wall Street firms. He only made things worse by his smug attitude and expectation to buy his way out of jail despite being nothing more than an upstart.
Shrekeli is more unpopular than flesh-eating bacteria so nobody will pity him, and rightly so, but his downfall is also a warning to every CEO, CFO, chairman and president whose investors include large Wall Street firms: behave, or we shall break you like hounds upon the hare, and legally so.

The Symantec board is doing its utmost to show they are not like Shrekeli: the SEC has already been notified of this problem and as soon as we have news we’ll inform out esteemed investors. If needed our whole boards of directors will go on pilgrimage to Santiago (obviously barefooted) and perform many acts of penance, including wearing a hair shirt.

It’s likely this won’t save the company (and its shareholders) once the real nature of this “problem” will be made public, but it’s worth a shot to save the executives’ skin. See how humble and cooperative we are, please don’t bring out the hounds.

It is the virus of fraud where most IT and several companies have been engaging in. A type of virus that helps cook the books. It lays hidden till…… Hard to uncover till…….whisper blower?
Just watch CEOs made their announcements.

If you aren’t an IT professional or a really serious computer afficianado, it looks like an alien landscape when it comes to the whole virus- antivirus thing. As a serious amateur photographer, I set up a separate Mac system to use for image tweeking that isn’t connected to the Internet. I copy finished images onto a CD or flash drive and upload them to photo printer through a Mac laptop connected to the Internet.

For people like me, a computer is a tool, not the end product. So I don’t want to spend anymore time on computer related issues than absolutely necessary.

The USB flash drives can be a major vector for virus transmission between computers. That’s how the Stuxnet virus was inserted into all the programmable controllers for the centrifuges that the Iranians were running in their uranium enrichment program. Technicians servicing the centrifuges were probably slipped these virus infect flash drives and as soon as they plugged them in, the controllers were infected.

If your Mac connected to the Internet gets infected, the virus could easily be of the type to seek out a USB flash drive to infect.

At work, there’s about 25 McAffee programs running silently in the background which lock down the workstations. The USB ports cannot be used to upload or download anything into these computers.

Just stick to using a CD (or any dumb medium like a floppy disk etc) and you should be okay.

Gandalf

May 12, 2018 at 2:14 am

Norton’s reviews for the Mac seem to be more favorable than for the PC version as far as usability goes. I think maybe because the MacOS is UNIX based and so its parts are sandboxed already. The last version of Norton I used (probably about 6-7 years ago) seemed to be trying to segment out different parts of the Windows OS and this just slowed everything down and made doing anything slower. So, yeah, give that Norton a try. I haven’t used a Macintosh since 1991.

Ricardo

May 12, 2018 at 2:48 am

I taught at a school in Thailand and virus via various teachers flash drives were the norm. Bit like HIV really in a computer way.

Is still a good way to find out what antivirus works best by using infected files.

Clam AV constantly gets the worst results. Some years ago the Avast for windows was good, nowadays I got no idea. Doctor Web is only recommended if you don’t mind your information leaking out because as the name says it works by online scans.

Is a real shame because Norton used to be one of the best.

F-prot worked very well for DOS. I dunno how good the Windows version is.

Since 2012 is owned by a company that totally ua not a spy for the Israel and US government.

Let’s face it all modern antiviral software is spyware, some like Doctor Web are just more blatant about it.

Kaspersky anti-virus was involved in a security breach and data theft from the laptop of an NSA contractor in 2017, so I am not kidding about Kaspersky being Russian spyware. It was alleged to be a hack of the Kaspersky program, but like yeah, right.

It was after this happened that the US government in 2017 banned Kaspersky antivirus from use in all USG computers.

Bloomberg Businessweek in 2015 published this article about Kaspersky’s deep roots and ties to the Russia security services:

Romania does seem to be a bit more of a neutral country, which is another reason I like Bitdefender.

Being cheap, I used to use the free antivirus programs, but no longer. None of them are really any good, although Avast does get good ratings for the Mac. The constant popup ads are incredibly annoying though.

I can’t understand why Symantic AV products are so popular. Open up the resource monitor and see how many cpu cycles their stuff eats. On Windows I recommend ESET Smart Security. With ESS the heavy lifting is done in assembly language so it is very light on resources. In the corporate world its a good gig to constantly be fixing computer software!

No one would even need antivirus if they simply disallowed themselves admin rights. Crank up UAC to max and use a non admin account and enter the admin pword when you need to install something. If you’re installing so often that this bothers you, then you are installing too much crap.

That is the question. At an 8x multiple, that is a good deal (Sarc, of course). I can only imagine they thought the stock could only go up up up forever. It appears they didn’t get what they bargained for.